Cosmos+Ethereum: Positive-sum final game

Original title: "How Cosmos & Ethereum are converging"

Written by: Sebastien Couture, Partner at Interop Ventures

Compiled by: Tia, Techub News

In 2023 In a March episode of the Bell Curve podcast, cryptocurrency researcher Hasu mentioned the blurring of lines between Cosmos and Ethereum. He believes that the Ethereum community has excelled in execution and innovation, while praising Cosmos’ technology stack. This blurring of boundaries may bring more opportunities for cooperation and communication between the two projects, thereby promoting the development of the entire cryptocurrency field. This mutual learning and integration between cross-projects is expected to open up new possibilities for the development of blockchain technology and promote further innovation and progress in the industry.

<img src="https://img.php.cn/upload/article/000/887/227/171115540292491.png" alt="Cosmos+Ethereum: Positive-sum final game">融合：2024 年 2 月 29 日在 ETHDenver 举行的 Cosmos 和以太坊碰撞专题讨论会

Interop Ventures has thought a lot about this topic, and we held the "Convergence: The Collision of Cosmos and Ethereum" themed event during ETHDenver 2044. The event, in partnership with Polygon and Noble, featured Noble co-founder Jelena Djuric, Polygon co-founder Sandeep Nailwal, Union co-founder Karel Kubat, Movement Labs and 0xMuto co-founder Rushi Manche. Sebastien Couture, Partner at Interop Ventures, moderated the panel.

Understanding Cosmos

Many astronauts and those outside the community believe that Cosmos appears to be in a permanent identity crisis. There are many perspectives on Cosmos, and different people have different understandings of it: as a technology stack, as a chain (and its pledged assets), and as a community.

Since its inception, the multi-chain theory has been the core concept of the Cosmos community. While Ethereum users are suffering from rising gas costs, the community has also explored multiple scalability paths before settling on a development path with Rollup as the core. Even before these solutions were widely accepted, Cosmos and Polkadot were moving beyond the single-chain model to propose a new model of sovereign application chains built on trust-minimized interoperability protocols, as demonstrated by Cosmos and IBC.

Cosmos was originally synonymous with ATOM and Cosmos Hub. As the most secure chain built on the Cosmos SDK, the Hub is fully capable of becoming the focus of the IBC network and acting as a port city between the IBC connection chain and the outside world. Over time, as new chains emerged, the importance of the Hub waned, and the definition of Cosmos shifted to include a powerful and versatile technology stack: Cosmos SDK, CometBFT (aka Tendermint), and IBC.

At the core of the Cosmos philosophy is sovereignty, where chains choose their own set of validators, are governed by token holders, and can be customized to the needs of the application. Another significance of the existence of sovereignty is to oppose the single-chain L1 model, in which applications must pay high gas fees, but users and stakeholders can capture very little direct value.

"I have always believed that Cosmos is a team that values ​​sovereignty. To me, this is the most decisive thing in the Cosmos community."

—— Sandeep Nerwal

As the Cosmos stack becomes more widespread, the consensus on Cosmos becomes a world connected by IBC - the Internet of Blockchains.

Consistency meme

There are two ways to observe the consistency of Ethereum.

One is to choose to be consistent with Ethereum’s Gas token ETH. In this paradigm, anything that brings value to ETH is considered aligned with it. Maximalists fall into this category, according to Sandeep, who believes that this form of conformity is purely profit-driven. Karel noted that EigenLayer is popular among ETH holders because it aligns with the asset and brings value to token holders.

Another option aligned with the Ethereum philosophy. Underlying this is the belief that trust-minimized, open, and censorship-resistant systems are a net good for society, and that building Web3 is noble and just. Those aligned in this way do not care about money, but rather want to see the Ethereum project achieve its ultimate goals. According to Sandeep, there are only a few who fall into this category.

<img src="https://img.php.cn/upload/article/000/887/227/171115540390431.png" alt="Cosmos+Ethereum: Positive-sum final game">Jelena Djuric、Sandeep Nailwal 和 Karel Kubat 在丹佛举行的 Convergence 早餐会上

For a Cosmos chain like Noble that places a heavy emphasis on sovereignty, it makes sense to align with the ETH asset because it means benefiting from the most decentralized and secure chain. Jelena’s insights provide a different perspective, showing that off-protocol consensus chains can align with assets purely for practical and functional reasons, without falling into either of the previous camps.

For 0xMuto, consistency helps business development and community building, and is strongest in bear markets with low liquidity. Consistency is a meme that fades away in bull markets where liquidity is high and incentives to chase yield are abundant. Ultimately, consistency should be used as a community-building tool, but never a hindrance.

Cosmos Consistency = IBC Consistency

While Ethereum’s consistency issues run counter to its native asset and philosophy, Cosmos’ consistency takes a different form. Since there is no canonical Gas token or central value accumulation mechanism, the chain is only aligned with Cosmos in a technical sense.

Being aligned with Cosmos means being aligned with the stack and with the tools that tie it together: IBC.

Teams like Neutron, Stride, and Aether are leading the way in aligning with the Cosmos Hub and accruing value for ATOM. Their efforts represent an optimistic exploration of the Hub as a potential security provider. While the Hub continues to evolve on its path to long-term success and sustainable value, these initiatives mark good progress towards realizing its significant potential.

In fact, Cosmos consistency seems to mean choosing technical solutions rather than helping others carry their luggage. For those who want to build cutting-edge applications outside of the protocol, there are few viable options, and the Cosmos stack is the most mature and versatile.

Take Celestia as an example. Its modularity thesis is based on the idea that Rollups will outperform application chains. For the Rollups ecosystem to become a reality, data availability is required. Ethereum DA is insufficient and scaling is too expensive. The conclusion from this logic is that you should build outside of the protocol, and the best stack for the task is the Cosmos SDK.

<img src="https://img.php.cn/upload/article/000/887/227/171115540392546.png" alt="Cosmos+Ethereum: Positive-sum final game">Sebastien Couture、0xMuto 和 Rushi Manche 出席丹佛 Convergence 早餐会

dYdX There is a single orderer Rollup on StarkNet, but it is not decentralized enough. Getting the order book on-chain while keeping gas costs low requires consensus among multiple nodes. CometBFT is the right tool for the job and is built to work with the Cosmos SDK.

Echoing what Ethan Buchman and Sam Hart said in a recent episode of Empire, the endgame for Cosmos is for every chain to be connected to IBC.

The Future of Cosmos

In its early stages, Cosmos is a means to launch sovereign L1. But with the advent of the bear market in 2022 and 2023 and the decline in asset prices, market capitalization has begun to decline, the value of pledged assets has dropped significantly, and many chains are struggling to maintain operations. At the same time, many L2s emerged - which were the easier and more attractive option.

Part of the problem is that building L1 is very difficult. The chain must establish a validator set, which means increasing the token supply by 20% on TGE to obtain a secure set. This puts pressure on tokens and chains to find PMFs and generate revenue quickly.

Last year, rolling out L2 proved to be much easier than rolling out L1. Many L2s have chosen to delay token issuance and implement points and airdrop systems to distribute tokens to the community. This led to innovations like yield stacks and other long-term aligned incentives that led to this bull run.

The Cosmos stack gives blockchains the flexibility to choose their execution environment (Cosmos SDK modules, CosmWasm, Move, EVM) and the freedom to build the underlying security layer that best suits their applications. Ethos solves the cold start problem, making launching L1 as easy as launching L2 while maintaining most of the sovereign benefits. With Ethos, blockchains have access to high-quality, cheap, and liquid security in the form of re-pledged ETH.

In this sense, the Cosmos stack is modular, allowing chains to leverage different infrastructure components, including external DA and security, at a lower cost Excellent user experience. Rushi noted that alternative VMs are an important part of the modular narrative, as chains can be built on top of more secure and scalable VMs like Move. With EVM smart contract bugs leading to billions of dollars in lost funds, adoption and TLV of emerging virtual machines with features such as formal verification and parallelization are growing.

The future of Cosmos is modular.

Cosmos Ethereum: Positive-Sum Final Game

The ultimate goal of Cosmos is to allow developers to build sovereign applications that interoperate with other cryptocurrencies.

From this perspective, Ethereum needs IBC. In a Rollup-centric world with thousands of chains and applications, atomic composability is broken and interoperability becomes a key principle of cryptocurrency. At the same time, Cosmos requires Ethereum and possibly Bitcoin for security. The Cosmos stack has no opinion on which underlying chain to utilize as the security layer.

The consistency of Cosmos and Ethereum is reflected in horizontal scalability and a modular stack that is technically superior to single-chain L1. Hopefully we can move towards a future where blockspace is fungible and secured by a large number of validators connected through IBC.

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